Increasing Australian Dairy Export to Japan - Case Study Example

Increasing Australian Dairy Export to Japan by name of the student Course title Name of tutor Institution name Department Date of submission Increasing Australian Dairy Exports to Japan Dairy farming plays a major role in the Australian economy. Though its milk production is small production is small, it has over the years risen to be the third largest global dairy exporter. As the domestic production increases, the Australian dairy product exports also increases. About 50% of Australian dairy products are exported with about 19% of the export going to Japan. The opportunities that may enable Australia to increase its export of dairy products to Japan can be determined by first identifying the challenges facing the dairy industry in the country and analysisng the market characteristics in the Japan. As the Japanese economy progress, the role played by Australia in global food supply is likely to shift, making the dairy industry to meet the growing demand for its products ahead of other competitors. Through analysis of the Japanese dairy industry, determining the present challenges in the Australian dairy industry and isolating the consumer characteristics in the target market, it would be easy to determine the opportunity of increasing exports of dairy product to the Japanese market. Analysis of the Japanese Dairy Industry Every business experiences its own challenges that prevent its successful operation. Any international business aims at being successful in any country they invest in order to globalise the name of their product or service. Import regulations Japan has four basic laws that govern both imported and domestically manufactured foods. These laws include: Agricultural Standards Law, Food Sanitation Law, Health Promotion Law and Food Safety Basic Law (Hayashi et al., 2009). The Japanese Ministry of Health, Labour and Welfare enforces all regulations specified in the governing laws, especially the chemical residue standards. The imported products are tested at the port to determine whether they contain excess of the maximum allowable concentration of any of the listed chemicals. In case of these chemical contaminants are detected, the product is rejected and the importer subjected to monitoring. In addition, all food products undergo a wide range of biological tests to ensure that they are free from pathogens, aflatoxins and other harmful contaminants. Apart from biological and chemical tests, the products must give a satisfactory negative result with coliform test. Moreover, all imported products are to be accompanied by health certificate, import notification, examination results, a certification from the manufacturer showing the ingredients, process of manufacturing and additives. Apart from the above restrictions, Japan also has strict regulations relating to genetically-modified food products and those produced through unapproved recombinant DNA technique. Such restrictions include BST hormone that hinders the trade between Australian and Japanese Dairy products. Government policy The Japanese government issues maximum production quotas that prevent excessive supply of milk beyond the domestic demand. A special board of directors has the mandate of designating the maximum quantities of manufactured and drinking milk in the country (Blayney et al., 2006). Japan annually produces about 8.3 million metric tonnes of milk of which 60% is processed as consumable fluid milk while 40% if further processed to other dairy products (USDEC, 2009). The quotas is aimed at ensuring that both produced and imported dairy products do not exceed the domestic demand so as to avoid a similar batter crisis to the one experienced in the year 2007. Consumer preference A report by the World Bank shows that Japanese income per capita increased annually for three years from 2009. Such an increase in income increases the consumption of animal proteins like dairy products. There is a changing trend in the Japanese diet which is becoming westernised due to repeated exposure to European foods during travels to such countries. Japanese consumers belong to a society that is characterised by affluence and innovation. According to Dong (2005), Japan has higher disposable income as compared to other Asian countries and as a result consumed more dairy products per capita than other countries from the region between the year 2000 and 2005. Dairy products consumption in Japan is to increase to change in dietary preferences of the young generation. In addition, urbanisation is contributing to the westernisation of the Japanese diets. Beghin (2005) argues that not only does urbanisation elevates the demand for more convenient food but it also provides a wider range of choices for consumers through expansion of restaurant chains and retailers. Smaller families are also likely to dine out leading to consumption of western foods like pizza. Trade Agreements The GATT Uruguay Round Agreement is one of the international trade agreements that addresses agriculture and has rapidly changed the export and import trend of the dairy products. The agreement has provided a dairy market access between the European communities and forty two other countries of which Japan is inclusive (GATT, 1994). Japan originally charged 27% on tariffs that exceeded the 10% tariff on import products. This was higher and was considered as a trade barrier between Japan and other countries. As a result of the agreement, the governments have been permitted to protect the local economies through local policies that should not distort trade with other nations. This has made it easy for countries like Australia to enter into with Japan in the dairy industry. The agreement increases market access that can allow for expansion and increase in export of dairy products by Australia. The World Trade Organization has charged each country with the mandate of developing its own standards, but the standards must be scientifically compliant with the general standard (USDEC, 2013). The Uruguay Round has increased opportunities for international trade among countries engaged in the agricultural industry. The system has changed to tariff-only that makes the dairy market more predictable. This assists the importers and exporters by making the supply stable (Blayney, et al. 2006). Furthermore, even though the standards differ from one country to another, it is desirable that each exporter complies with the standards of the country which it trades with. In conclusion, Australia dairy industry should evaluate its strengths and weaknesses in order t to capitalise on the potential market in Japan. If well positioned in the dairy market in Japan, and increasing butter imports will enable Australia's market share in Japan to increase. The constant deficit in Japan's butter ensures constant demand for it from foreign countries. The existing barriers that may hinder increase of Australian dairy export in Japan can be overcome by increasing the quality of the products which would ensure compliance with the client's standards. Bibliography Beghin, J. C. 2005. Dairy Markets in Asia: An overview of recent findings and implications. Ames, Iowa: Iowa State University. Blayney, D., Gehlhar, M., Hilda, B., C., Jones, K., Langley, S., Normile, M. A. and Somwaru, A. 2006. United States. at a Global Dairy Crossroads. Virginia: USDA. Dong, F. 2005. The Outlook for Asian Dairy Markets: The Role of Demographics, Income, and Prices. Iowa: CARD. General Agreement on Tariffs and Trade. 1994. The Uruguay Trade Agreement in the Dairy Sector. Geneva: GATT. Hayashi, Y., Sato, S., Obara, K., and Ito, K. 2009. Food and Agricultural Import Regulations and Standards- Narrative. Washington D.C.: USDA Foreign Agricultural Service. United States Dairy Export Council. 2013, January 9. U.S. export performance tops dairy highlights of 2012. News Release. Virginia: U.S. Dairy Export Council. Project Plan for Increasing the Export of Australian Dairy Product in Japan Project Description Japan is not only the largest but also the most valuable market for the exports of Australian dairy products. Over the years, Australia has remained a traditional major supplier of dairy products in the larger Japanese market. However, there is a rising competition for the market share by various countries such as United States, New Zealand and other European countries. The position of Australia as the major supplier of dairy products is therefore at risk and alternative approaches should be considered. Project Objectives Dairy Australia is objectively oriented towards supporting the dairy industry in Australia in order to improve its market position as the major supplier of dairy products in Japan’s market. This is to be achieved alongside application of high technological inventions to improve the quality of Australian dairy products that conforms to the standards that are internationally acceptable. By achieving these objectives, Dairy Australia will be able to increase its dairy export volume. Product Description There are several dairy products that Dairy Australia is to add into the Japanese market. The first product is the fresh milk which is widely produced for domestic consumption. Fresh milk readily goes bad due to its short life which means it Australia’s fresh milk export is limited to Ultra Heat Treated (UHT) milk. With a well developed marketing strategy and strong market share Dairy Australia can expand its entry into the Japanese market. Butter is the other product that is Australia’s dairy industry has used to enter into Japan. Though production of batter varies with the availability of milk, the increasing demand for butter in Japan provides an opportunity for more export into the market. One of the major products in the Australian dairy industry is the cheese. The exports have been doing well with over seven hundred million dollars sales being realised annually. this has been n the past and owing to the increased demand due to changing lifestyle and diet among the Japanese such as the liking for cheese by high income families with less people who readily take dinner outings, it s likely to be the product to fit well into the changing market. Currently Japan is consuming 50% of the Australian exports. Competitors like New Zealand and United States also export into Japan but with larger market share in the Japanese market, Australia is still able to control the market with its cheese products which has a competitive edge over other products. Australia also produces different kinds of milk powder including whole milk and skimmed milk powder. There is an increasing demand for powdered milk globally making the prices to rise and this has increased the level of production of powdered milk. Due to this demand, there is a need of disposing off the excesses into the Japanese market where Australia’s dairy products is already established and enjoys a larger market share. Lastly, Australia also produces whey and casein. These are residual products that originally were disposed off, but the discovery of the value of the components of whey especially in Japan has made its demand to rise. Australia exports 70% of its whey of which only 20% goes to Japan. There is a need of increasing the export to Japan where the demand of the product has increased in the recent past. Market Plan Market research In the market research, market related matters including target market, competitors and promotion are assessed. From the IBMP in the first section, it is evident that the dairy industry in Japan is dominated with foreign export. Countries such as New Zealand, United States and European Union are the major competitors in the dairy industry. Dairy Australia has diversified its product line by venturing into a variety of products which other competitors do not export into Japan. This has seen the Australian dairy product to enjoy the better part of the market and consumer confidence. Addition of these products in the market will therefore face less competition from other exporters. The quality of the Australian dairy products also meets most of the sanity standards set by Health Ministry in Japan. These products are now acceptable for sale in the dairy industry in Japan and can therefore be increased in volume without any fear of rejection at the port. From the market analysis, it is evident that 19% of Australian dairy products are consumed in Japan. Even though Australian dairy export is only 10% of the total global export, in Japan, alone its market share is about 50% as compared to New Zealand 24%, European Union 16% and United 8% States. Other exporters take only 2%. These statistics shows why Australia is the traditional dairy product exporter in Japan. Marketing Strategy Australia has low cost of production making its dairy products to be relatively cheaper as compared to its competitors. This is another strategy that has enabled Dairy Australia to have a competitive edge over other exporters. Sales promotion is to be carried out through the media. Adverts in the media will help create consumer awareness. This will help increase the customer awareness which is to increase the sales volume through increased demand. An increase in demand means that more supply will be needed and this will be achieved through the increased production. Project Schedule The project schedule will take 17 months as shown in table 1. The first two months is to be in carrying out preliminary market analysis. This will involve collecting data related to market such as politics, demands and government policy. The market survey will also commence with the market analysis at the same time but will run longer with one month. There is a need for a further market familiarisation. Selection of products and their evaluation will take the next two months. This is appropriate in that the selected food products must be appropriate and must meet the sanity standards set by the Japanese government. In order to fit well in the business, there is a need for the Dairy Australia to get a well established Japanese cooperative to work with especially in the supplies and market penetration. Two more months will be taken to find an appropriate local cooperative that would enable the products to enter various market outlets like grocery, supermarket and restaurants. Three moths for market propaganda are to be used to broaden the influence in the market. In the following one month, the dairy products are exported to the foreign market. Two months is further set aside for entry into the market. Our Products must be made available in all supermarket outlets during the period of entry. The new product, at this point wins customers' interest and the sales begin to improve and so the group opts to open an overseas branch office. This is to take about four months in the selection of the location. Lastly food production and storage equipments are to be ordered and installed in three and two months respectively. Table 1 Time schedule for the entry into foreign market with a new product. Risk Management Risk is a bad outcome that results from uncertainty. On the other hand, risk management is the process that weighs the policy alternatives to reduce, minimise or contain the assessed risks. Raw milk is one of the products that are destined for consumption. It can carry pathogenic micro-organisms like salmonella, Escherichia coli, Campylobacter jejuni and Cryptosporidium (Ferris and Miller, 1991, Cullor, 1995). These pathogens are transmissible to man through milk that has not been pasteurized. The milk is therefore pasteurized through the appropriate scientific process and any post pasteurisation contamination should be prevented. Pre-pasteurisation cooling should be conducted at adequate low temperatures to eliminate chances of development of heat-resistant microbial toxins. Following the right steps during pasteurisation also help reduce the risk of the milk going bas quickly thereby leading to loss. Pathogen reduction can be eradicated by introducing the measures right from the farm. There should be restrictions on the movement of dairy products until a detected source of pathogen is completely eliminated. Another way of managing the risk associated with pathogens is the institution of the hazard analysis critical control point (HACCP) programme to carry out an investigation into the past and present prospects of an existing pathogen. HACCP should be applied right from the farm to help curb all chances of the pathogens finding access into the dairy products (FDA, 1994). During packaging and distribution, the dairy products, should be handled with care to avoid contamination. In addition, all other processes should be carried out to the required standards to prevent damage and contamination of the products. Bibliography Ferris K.E. and Miller D.A. 1991. “Salmonella serotypes from animals and related sources reported during July 1990-1991.” US Animal Health Association, vol. 95, pp. 440-454. Department of Health and Human Services, 1994. “Hazard analysis critical control point system, invitation to participate in a voluntary HACCP pilot program for the food manufacturing industry. “ Federal Register, vol. 59, pp.4. Cullor, J.S. 1995. “Common pathogens that cause foodborne disease: can they be controlled on the dairy?” Veterinary Medicine, pp. 185-194. Read More